Greater visibility: supporting both strategy and compliance teams

Being an analytical company we have long obsessed about gathering and utilizing data to drive improved performance, while ensuring it is always aligned to the changing focus of the industry towards regulatory adherence. We now see this same data helping to improve compliance.

Our Head of Compliance Management, Chetan Patel, and Lead Strategy Analyst, Rupert Wood, discuss the benefits of greater visibility of account level supplier activity.

What first interested you in gathering account level supplier activity data? 

RW – We started gathering account level activity data over five years ago on portfolios where we defined and managed the agency strategy on behalf of creditors. Our initial objective was to really understand the drivers of liquidation. Understanding the data better enabled us to modify our approach based upon the activity deployed by the agency, for example, by seeing that an agency’s collections strategy stopped after 90 days we were able to re-call accounts early to ensure they continued to be effectively managed through their lifecycle with no delay.

CP – We soon followed suit in utilizing this data as part of our audit and compliance activity, again with the first step being to use this new found visibility to target specific accounts. We could suddenly focus our audit activity on accounts where things were actually happening, and no longer review hundreds of accounts with no activity to find a small number where real contact was made.

Has this approach changed over time?

RW – The next step in our journey was exception management, this enabled us to immediately identify exceptions to process; for example when activity levels dropped or were missed on batches of accounts. We used this in conjunction with our agencies and were able to support them in identifying exceptions to their process, a great example being when we were able to directly identify the benefits of one agency utilizing a new data append, immediately tracking the increased dialler, contact and therefore liquidation rates, which drove a greater than 10% uplift in performance for that agency.

CP – Exception reporting has once again been hugely beneficial to monitoring an agency’s compliance, I can now immediately identify any accounts which have had, for example, excessive dialling or out of hours calling, I can then target any audit activity to these accounts to understand the root cause. No longer am I reacting to what I find through random account level monitoring but I am able to be proactive and immediately identify issues as an when they happen.

What’s the next evolution in how this information is utilised?

RP – In the age of ‘big data’ we  continue to gather more and more information and utilize this in novel ways to enable us to be truly customer-centric and ensure that the customer journey results in the best experience possible. As an example, there is little reason recycling a customer who has just engaged in dialogue with an agency and has outlined their financial situation, to another agency only for them to have to go through the whole process again. Having this information available to all enables the industry as a whole to tailor their strategies to prevent this from happening.

CP – As the focus across the collections industry continues to shift towards compliance having visibility of what suppliers are doing on accounts will become ever more important. As regulatory requirements continue to grow so will the need for this level of agency monitoring; without the right technology in place to easily obtain, store and access this level of data, creditors will be blind to what their suppliers are doing, presenting a significant risk to the organisation.

How small changes lead to big success

If you were watching the news over the summer you will have seen that Sky pro-cycling did it again, a second Tour de France win in succession. It was considered an outrageous statement by David Brailsford in 2010 when he announced there would be a British winner within five years. Now in 2013 we have two.

If you believe what you read, this achievement has been based solely on marginal gains – a lot of small changes that add up to a significant change overall. However, if you delve deeper into the framework of this success we can identify a number of factors that have contributed to their winning streak.

1. Having a team with the skills and motivation to succeed
2. Understanding what they wanted to achieve from the start
3. Understanding where they were in 2010
4. Putting  a realistic plan in place to see how they could get from where they were to where they wanted to be

It’s also important to understand the ‘aggregation of marginal gains’. Put simply, how small improvements in a number of different aspects of what we do can have a huge impact on overall performance.

So how does this relate to business? Well surely we can use a similar formula in business to imitate the level of success Team Sky has experienced? If we follow the Sky recipe, what ingredients do businesses need?

1. Business goals
2. To be honest and understand where the business is today
3. To have a plan of action
4. To have the motivation to succeed as well as a commitment to continuously develop skills and knowledge

Remember, never underestimate the power of small positive changes; tiny incremental changes add up and make a large difference to the overall whole.

And this strategy doesn’t just apply to businesses; it’s relevant to all processes and teams that operate within any business. Adopting this simple approach will not necessarily guarantee you the success that Sky had, but it may well put you on the pathway to success.

By Richard Anderson, Senior Consultant, Advisory, TDX Group

You can’t build castles on quicksand: the data behind the story

John’s blog last week outlined the importance of the getting the basics right with respect to managing third party collections activity. As the Lead Analyst at TDX for Platforms and Processes, my team’s responsibilities include the development, maintenance and monitoring of exception reporting for portfolios under our management. As such, this article strongly resonated with me and also allowed me the opportunity to reflect on the findings that my team have made through the analysis of over 20 million accounts with a value in excess of $15 billion.

Data gathering: “Visibility drives Compliance and Performance”

• Successful analytical teams will be focussed on analysing data and not just gathering it.

In order to effectively monitor your foundations the key requirement is visibility of all processes. As with buildings this may not be that easy unless you have a well-structured and efficient way of storing, accessing and utilising the data required. Unfortunately most systems are not purpose-built for managing accounts placed with third party collection agencies and hence this information can be near impossible, or at least require significant resource, to gather.

Account Reconciliation: “The Risk and Reward of knowing where your accounts are”

• Up to 12% of accounts are not actually where the creditors thought they were.

The first principle of sound fundamentals is ensuring that each account is being managed by the agency you think it is assigned to. Upon taking over the management of large stock portfolios we see that up to 12% of accounts are not actually where the creditors thought they were. The implications of this are significant; we often see accounts being managed by two agencies at one time which creates concerns from both a compliance and brand risk perspective. This also impacts on performance as large batches of accounts can never reach collection agencies or sit dormant on the host platform for years. The mitigation for this is weekly account reconciliation, and as with data gathering, this process needs to be fully automated and supported by actionable MI to remove the significant resource implication that this can create.

Recycling Processes: “Time affects performance more than creditors think”

• 11% performance impact from delays to recycling accounts

The process required to recycle accounts from one agency to the next in the placement strategy contains a number of checkpoints. Failures or delays are often driven by system constraints which can result in a requirement for resource-intensive manual processes to manage accounts. Again effective monitoring must be in place to ensure that the right accounts are being recalled at the appropriate stage of activity, they are being returned or disputed in a timely manner by collections agencies and they are then recycled correctly to the next agency. The importance of getting this right should not be underestimated as, for example, we have observed an 11% performance impact from delaying the replacement of accounts by one month.

Query and Dispute Management: “Customer Satisfaction, Compliance, AND Performance”

• Quicker resolution drives performance uplifts of up to 40% on disputed accounts*

Queries and disputes present both risks and opportunities. They can be easily escalated into complaints if not responded to promptly and effectively. Conversely, once contact has been made with the customer, query resolution is likely to drive payment. As such, effectively managing queries and disputes needs to be a core focus of any vendor management activity. As a result of the ~1 million queries raised across our portfolios over the past 10 years and the improvements driven over this period, we have been able quantify the benefits. Resolving a dispute within three days rather than two weeks drives a performance uplift of over 40% on disputed accounts. As disputed accounts can drive up to 30% of collections across certain portfolios, this can have a significant impact.

These examples hopefully demonstrate that developing sound fundamentals not only provides strong ‘foundations’ upon which complex strategies can be built, but also drive their own performance and compliance benefits which in isolation can be hugely significant.

*For a recent detailed case study on how these principles generated substantial returns for a large credit grantor click here.

Tom Miller, Lead Analyst Platforms and Processes, TDX Group

Email is dying: are Skype and Facebook the new customer contact points in the debt industry?

Do you remember when email was new? I was seven years old when I signed up for my first email address. Back then, dial up internet on pay-as-you-go was still the normal. I was so excited waiting 30 minutes for my mum to get off  the phone so that I could read the email my aunty sent, or a friend at school. It was like getting mail but a lot cooler, and when I was seven years old I was very excited whenever I received mail in the post...

Now I'm an adult, I have very quickly realised; mail in the post is usually one of two things 1) an advert or 2) another bill to pay... yay...

Now with my iPhone, I carry my email in my pocket, which is great! Except that, most of my emails are now, well, either a bill or an advert - and a lot of websites request an email address in return for a service. You can't buy something from Amazon without having to sign up. Not surprisingly, I get regular emails from them advertising products every week. You may be able unsubscribe from the mailing lists, but most people find themselves fighting a losing battle to do this for every website they want to purchase something from.

Interestingly, the use of email as a form of communication between family and friends has declined massively since its heyday a few years ago. Even landline phones seem almost outdated now, everyone uses mobiles and the only people who call me on a landline are telesales…

These days, people use services like Skype and Facebook to keep in touch. They still advertise to us, but it appears in a less intrusive manner. I remember over a year ago I read an article about a technology company that was getting rid of internal email, with the company claiming that only 15% of internal email was useful. This just highlights the fact that we are already seeing a transformation from email towards social networking and instant messaging in the business world as well as in our private lives.

Yet in order to try and contact a debtor, we still focus on phones, addresses and emails...

This has left me thinking - what if we were to target Skype and Facebook instead? Communicating with debtors on a wider variety of channels can only be an improvement - right? But if we do that then how long will it be until people in general stop using Facebook because it’s just a bunch of adverts and bills? And how can we even predict which social networking sites will last? Everyone thought MySpace was going to last forever until Facebook came along…..

I honestly don’t know what the answer is, but as the modern world of communication is so fickle and rapidly changing – surely we should, as an industry, start preparing for the next forms of communication? Or will we just end up following debtors on short-lived sites like MySpace? The phrase “adapt or die” seems ever more relevant these days! Here at TDX we are recognising the ever-changing power of the internet through developing e-collections tools which are  some of the first on the market to make the most of our varied electronic communications methods - but are we prepared to keep ahead of the game, and can we even predict what the game may develop into? This is the modern challenge we all face in business and one nobody yet has the answer to.

Luke Simmons, Tester, TDX Group

Enhancing the auction process – how portfolio analysis adds value in a debt sale

This is the second post in our series that offers 'a fresh view' on the debt industry. They are the thoughts and observations from colleagues who have recently joined TDX Group.

Liz Crosland-Taylor joined TDX Group in March 2013 and works in our Advisory team. Here she shares her thoughts about how a debt sale has similarities to being at an auction. 

For the past few couple of months I have been working in our TDX Debt Sale team. I remember my initial reaction when I was briefed on the debt sale function – confusion, along the lines of… so, people actually pay money to obtain debts?

But quickly, this began to make sense. I see that the function of debt sale has similarities to being at an auction – in fact, purchasers do actually ‘bid’ for a portfolio, or segments of it. But, just like at an auction, how do bidders and sellers ensure they buy or sell the right lot for the right price? I suppose it all comes down to the varying perception of value, and how we can create and maximise it.

One thing that intrigues me at auctions is the mixed lots – a mystery box of china or glassware. These don’t usually have estimates, rarely have reserves, and it’s up to the buyer to establish what the value is worth to them.

However, some buyers might not have the time or inclination to visit and research into the contents of the lot. They may rely on the auction house to have noted one named piece of interest in the lot description, and take a chance with the rest… And they may rely on that named piece being authentic, or request the auction house buy back. Usually, the risk in this situation would result in the purchaser placing a low value on the lot.
It’s these principles and experiences that I see reflected in the realm of debt sale.

I would rather pay a little more for the items that I know and want, and less for a mixed lot that includes items I am not interested in – and an awful lot less when I know very little about the items on sale! I would prefer to avoid overpaying for a lot and realising I have obtained a significant number of items that are undesirable to me. That would cost me – literally – in deciding where I put them and how I get rid of them, and cost me in the time it takes me to do so too. This ‘unknown mixed lot’ can essentially be considered largely unattractive and of low value.

It can be similar in debt sale. Everyone has the prospect of realising greater value when given the opportunity to purchase accounts they are specifically interested in, and have greater knowledge of. When the time and effort is taken to carry out analytics, appropriately segment a portfolio and do sufficient research to produce a detailed marketing pack, it yields strong positive results for all parties.

So, returning to the auction process, perhaps sellers should take a leaf from our book? - become more profitable by segmenting their mixed lots, or spending a little more time researching and documenting the contents, helping to achieve higher prices? But then again, I realise not everyone would have an existing structure or the resource to make that into a viable commercial action. Working in TDX debt sale, I have seen how we provide a service that adds value for both the sellers and buyers of debt – it’s just a shame there isn’t an equivalent for me to take advantage of at the local auctions.

Liz Crosland-Taylor, Consultant, TDX Group

Third Party Collections – you can’t build castles on quicksand

There is a wide array of somewhat tacky quotes about building on solid foundations and chains being only as strong as their weakest link. I won’t bore you by quoting these, but I would like to outline their relevance in managing third party collections activity.

Analytics, data and insight are like 21st century modern buildings: exploring new innovative ways of utilising the above techniques to align collections strategies with customers’ needs, hence improving customer experience whilst driving performance. As with these extravagant new buildings, the importance of sound foundations which underpin the overall solution is often overlooked. The same can be seen in the collections industry where underlying technology is a key enabler of innovative activity, for example:

• Do systems allow for the seamless integration of external data into third party collections activity?
• Can a segmented approach be deployed to ensure that the right debt is supplied to the right supplier?
• Does the introduction of a segmented approach cause fundamental challenges around areas such as account and invoice level reconciliation?

Ensuring that all elements of a process are working effectively is the key to success in any field. As an example, the best quarterback in the world will be ineffective without the necessary levels of protection from his offensive line. Once again, the same is true within an external collections strategy which, even with the most sophisticated strategy with superior suppliers, will be totally ineffective if;

• You cannot be 100% confident in the exact location of all accounts, and hence accounts are falling into black-holes and being un-worked
• You are not responding to queries in a timely and effective manner
• Accounts are not closed and recycled to latter stage placements in an effective and timely manner

As with engineers designing and building new structures from the foundations up, we see that the deployment of effective technology and processes is the key to building and developing an effective external collections strategy, without this buildings (and processes) quickly come tumbling down!

By John Telford, CEO - North America, TDX Group